IBM to Relocate Laid-off Workers to India, Elsewhere

IBM has been shedding employees at a rapid rate in the last few years as its mainframe computer and consulting businesses struggle to compete.  In a novel twist, it’s new Project Match program will move some adventurous Americans overseas to be closer to new, lower-paid information technology workers.

“IBM has established Project Match to help you locate potential job opportunities in growth markets where your skills are in demand,” IBM says in an internal notice on the initiative. “Should you accept a position in one of these countries, IBM offers financial assistance to offset moving costs, provides immigration support, such as visa assistance, and other support to help ease the transition of an international move.”

InformationWeek says:

The climate is warm, there’s no shortage of exotic food, and the cost of living is rock bottom. That’s IBM’s pitch to the laid-off American workers it’s offering to place in India. The catch: Wages in the country are pennies-on-the-dollar compared to U.S. salaries.

The upside is that the cost of living is also much lower there, making the move potentially very interesting to some workers, especially during a recession at home. 

“It’s more of a vehicle for people who want to expand their life experience by working somewhere else,” said the spokesman. “A lot of people want to work in India.”

I think taking advantage of such an opportunity would be a really cool thing to do, especially if one is young and/or childless.  Working for a couple years in a foreign, exotic locale would be a source of some great life experience.

Ayn Rand’s "Atlas Shrugged": Novel or Prophecy?

Stephen Moore writes that the central themes of Ayn Rand’s massive book are playing out even now in Washington D.C. as an incompetent government hurries to create massive new legislative programs to dole out ever greater amounts of money to mis-run businesses, all under the guise of keeping the American economy healthy.

The current economic strategy is right out of “Atlas Shrugged”: The more incompetent you are in business, the more handouts the politicians will bestow on you. That’s the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies — while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to “calm the markets,” another trillion of national wealth is subsequently lost. Yet, as “Atlas” grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate “windfalls.”

Predictably, the left end of the discussion at Memeorandum is aghast at Moore’s temerity in pointing out the obvious.  Witness KTK’s anti-Rand diatribe at Leaning Left in which future generations of heroic regulators will save America by keeping the individualists and capitalists in line and forcing them to pay for the do-nothings’ “robust social services” that the Obama administration was elected to implement.

Yet Washington does in fact create many of our financial and social problems through its legislation, does in fact attempt to solve those problems with even more all-encompassing legislation and regulation, and does in fact confiscate massive amounts of money from successful Americans with the intent of redistributing it to those unable to earn it for themselves.

Moreover, the Congress consistently disguises in these destructive activities by branding their legislation with soothing code names such as “No Child Left Behind” and the new “American Recovery and Reinvestment Plan”, a plan so bloated and massive that the Obama administration has been forced to admit that it will leave the enormous deficits of the fiscally irresponsible Bush administration in its dust in order to implement the left’s next New Deal – this before Mr. Obama has even had a chance to sit down in his new chair in the Oval Office.

KTK says:

…the economy isn’t collapsing because of the GI Bill, Medicare, the interstate highway system, or FDIC insurance for bank deposits. Those are among the few parts of the economy that worked rightly…

For one thing, the economy isn’t collapsing at all – it’s belatedly adjusting home and stock values to something closer to actuality.  This after years of Americans living in a financial fairy tale in which everyone, regardless of race, creed, color, or ability to repay loans, deserved to own their own home and spend indiscriminately on credit cards they never should have been issued.

But what entitlementists on the left never, ever dare acknowledge is that it is their “robust social services” like MediCare and Social Security that will ultimately destroy the American economy if they are allowed to.  The tens of trillions of unfunded – and unfundable – obligations these programs call for are the centerpiece of liberal social engineering.  They are also the rocks upon which the great ship America will founder unless we steer hard away from them.

Competition No Longer an American Ideal?

Michael Lind says that southern states have waged an economic civil war on the rest of America, the real America, in Lind’s mind, by creating an economic environment in which companies want to do business and bringing jobs from the heavily unionized north of the country and from overseas.  This, Lind Says, creates wage competition that harms American workers and America’s viability as an international economic power.  Is he right?  Should Americans workers demand an end to competition in labor markets?

Absolutely not.  What Lind calls a race-to-the-bottom rivalry between the south and the rest of the country is really the pursuit of economic efficiency, a necessary action in a country whose labor costs far exceed those paid to workers in most of our economic competitors.

In the early 20th century, the Southern states were the first to adopt conscious statewide economic development policies, which then as now meant poaching industries from New England and the Midwest where wages and public spending and regulation were greater. That’s how the South took the textile industry from New England, before losing it to lower-wage Asia. Now with the help of Nissan, Toyota, and BMW, the South is trying to replace Detroit as the center of U.S. automobile production, using low wages, anti-union laws, and low taxes to benefit from the outsourcing of industry from societies more advanced than the South

What of it?  Is a Massachusetts company obligated to keep its textile mills open even as they bleed the company dry by losing money year after year?  Must a manufacturer in Michigan keep an automotive plant running at a loss simply because they chose Detroit as a location for the plant 30 years ago?

No.  Businesses are obligated to meet the commitments they expressly make to employees, of which there are relatively few: make payroll on time and in full, supply promised fringe benefits, meet or exceed safety standards, provide compensation for on the job injuries, and keep other employee/company-specific promises.  That’s it.  There has never been any guarantee of lifetime employment in any industry, no matter how venerable and/or wealthy the companies.  Nor should there be.  Workers who face no consequences for slovenly work, absenteeism, and safety failures, among others, will inevitably commit these offenses with increasing regularity.  Spend time in any union shop and you’ll understand this quite clearly. 

Lind champions unions in spite of the evidence against them.  Nothing could be more damning than the effects unionization has had on Detroit’s Big 3 automakers.  Yet Lind blames southern states’ efforts to entice Nissan, etc., to do some of their manufacturing in American as the problem.  In his mind, Americans would be better served by having either excluded foreign automakers from the U.S. manufacturing sector or to have forced them to accept a union work force.  The former was certainly an option, though hardly desirable; the latter would never have happened.  Japanese automakers would never have agreed to those terms, knowing full well that drinking the unions’ Kool-Aid would have been akin to slugging it down while in Jonestown.

Lind’s agenda becomes crystal clear halfway through the article:

Call it the Third Reconstruction. The first step is to end the race to the bottom in wages and regulation, by national action. The national minimum wage should be gradually raised until it is a living wage, of $10 to $12 an hour, and it should be adjusted for inflation. At the same time, federal regulations should set a higher floor with respect to worker safety regulations, environmental regulations, and others, preventing America’s own internal rogue states from gaining any advantages by flouting national standards. Most Southern politicians and business leaders will howl that this will bankrupt the South. That’s what they said about the abolition of slavery, child labor, and the convict lease system, too. The South was a better place to live after those reforms, and it will be a better place to live when there is a living wage throughout the South.

Were such legislation to be introduced it would undoubtedly be given a more circumspect name.  Lind is too honest for his own good – he’s actually acknowledged his purpose by calling for the reconstruction of America’s competitive economic culture.  How gauche of him not to wrap it up in a glitzy package with a cute bow on top.

The core problem with what Lind wants to do, economically speaking (there are others, the deliberate destruction of the conservative Christian, Republican south, for one) is that there’s no such thing as a "living wage".  Congress has mandated a minimum wage, right enough, but that’s not what Lind and other progressive types want.  What they want is a floor for wages below which no employee can fall, regardless of how few abilities he or she brings to the table, how incompetent his/her work might be, or how little value the employee brings to the organization.

This last point is essential.  Employees must bring value to a company, value in excess of the resources that they consume.  Otherwise the company eventually dies.  Would a custodian, for example, bring $24,000 worth of value to a bank, for example?  Unlikely.  Perhaps in an upscale hotel or resort that attracts an elite clientele who expect the posh treatment, but not in most businesses.  Forcing wages above the value of the work an employee performs is a death sentence to employers.  It amounts to little more than another welfare program, albeit somewhat disguised in the form of taxable payroll "earnings".

American businesses or the southern states do not need to be reconstructed.  Rather, idealists like Mr. Lind need to realize that businesses will always pursue the combination of low-cost, high-skill labor wherever it exists, inside or outside America.  Punishing the southern states that brought Nissan and other foreign automakers into America and created thousands of new jobs while lowering the cost of good-quality vehicles in the process makes no sense at all when looking at the big picture. 

Reality cannot be legislated away.  That’s the primary reason why the Senate rejected the planned bailout of Detroit’s automakers and that’s why the government must not succumb to the temptation of guaranteeing a living wage to those who don’t perform work that warrants such a figure.

The Wisdom of Markets

Crowd-sourcing, capturing the “wisdom” of the mob, was what the cool kids were doing not so long ago.  Witness the rise of the Daily Kos and other such web sites.  One thing they failed to espouse in their almost universal progressive liberal dogma is that the idea of mining – and manipulating – the minds of the masses is not a new idea.  Free markets do that very same thing, efficiently causing desired products and services to spring into existence and eliminating the unwanted.  How could progressives have overlooked the most important example of their new idea?

Continue reading “The Wisdom of Markets”

U.S. Automaker Bailout Happening

The Houston Chronicle says that U.S. automakers will be getting $15B in "emergency loans" and a new boss in Washington D.C. in the form of a "car czar" who would have to power to force GM, et al, into bankruptcy if the companies fail to reduce labor and financial costs in a timely manner.

Stephen Green’s picture says at least 1000 words:

image 

Republicans are feeling left out of the process are talking tough about slowing down or stopping the proposal from being enacted.  Mitch McConnell, Senate minority leader, is among them.

“Republicans will not allow taxpayers to subsidize failure,” McConnell said, although he added that the auto situation would be addressed by the end of the week.

That may be; however, how can McConnell explain the massive bailout of financial companies, a corporate welfare blockbuster that is at minimum an order of magnitude larger than what has been proposed for automakers?  Rhetoric aside, subsidizing failure has become the order of the day.

At least the proposal Democrats and the White House have agreed on provides for the possible – inevitable? – bankruptcy of the automotive giants.  Short of massive, voluntary wage reductions on the part of the UAW and other unions, I fail to see how any other outcome is possible.

GM, the Company No One Wants

GM has a physical plant and inventory assets that exceed its current market capitalization of around $3B.  The company would be ripe for a takeover if anyone wanted it.

Instead, GM executives want Congress to loan it $18B to stay afloat while they try to whittle away at the mountains of debts and obligations they’ve incurred.  But could the company ever hope to pay that money back?

GM said it would look to reduce its debt by almost $36 billion by asking bond holders to swap out of existing debt, and that it would negotiate new terms for its planned $21 billion contribution to a health care trust fund run by the United Auto Workers union. In so doing, GM plans to cut its debt to $30 billion, Henderson said.

Wow.  GM’s grand plan is to cut debt to the point that it’s only 10 times what the company is worth?

“The plan is intended to accomplish what would otherwise be achieved by a bankruptcy filing,” he told reporters. “It is not our plan to resort to the bankruptcy court.”

Why on earth not?  GM must cut labor costs because the company’s are about 50% higher than Toyota’s are.  Despite the consequences to its members and some willingness to help the company out, the United Auto Workers union is not going to allow that to happen.  Bankruptcy is the most likely avenue for GM to slip the anchor that the UAW has chained to the company’s bottom line.  Failing to do so will cause the union’s dead weight to finally, inevitably, drag the company under.

Jollyroger wonders why the UAW, which is sitting on a huge pension fund looted from automakers over the last several decades, doesn’t simply buy GM outright.

Surely this is the moment for the workers on the factory floor to purchase the instruments of production.

Sounds like a real workers’ paradise, at least until GM’s losses drain the workers’ pension funds dry as well.  The UAW undoubtedly knows that it can’t run the company profitably.

That’s why over 60% of American’s oppose the bailout: we understand that the company cannot recover given it’s current business model and labor agreements.

The problem isn’t that GM’s products are horrible.  They aren’t.  But they aren’t as good as Toyota’s and they cost a lot more to produce.  There’s no way the company can go on bleeding money to the tune of $4B per quarter.  Something has got to give and it shouldn’t be taxpayers’ money.  As with the residential real estate market, the marketplace has not failed.  Detroit, bound in its shotgun death pact of a marriage to the UAW, et al, has failed.  Principle says that the government shouldn’t intervene simply because we don’t like the outcome.

Ian Welsh says that the government should buy GM itself, effectively nationalizing the company. 

Buy out the shareholders for the 3 billion their shares are worth, or hey, be generous and pay them double—6 billion.  In the current context, that’s not even real money.  Get the best auto people in the world and have them go in and restructure GM.  Spend the necessary money and make the necessary cuts.  Restructure the company to serve America’s interests—get the Volt working, increase mpg ratings, restructure the dealer network.  Do it all.  Fix the company and make it viable again.  Then, once it’s working again in a few years, start selling it back to the private sector.  Do it right and the government will make a significant profit.

The problem with this idea is that the government has no ability to make the kind of hard choices that would be required to bring GM back to profitability.  Too many people would be hurt by the necessary moves to make them politically acceptable.  The result would be continued losses, this time funded directly by taxpayers who are already overburdened by government obligations.

The sad fact is that we simply need to accept that these losses and failures are real.  Bailing out failing companies won’t make the losses go away.  Instead we need to accept reality, let the failures happen, pick up the pieces, and go on from there.  Doing anything else would simply be pushing the problem back a few years – and increasing its scope – in hopes of passing it off to the next generation.  That’s simply unacceptable on principle.

Opposing Bailouts on Principle

Oliver Hart, professor of economics at Harvard, and Luigi Zingales, professor of finance at the Chicago Booth School of Business, say that Bush administration economists have abandoned principle in their rush to bail out financial giants AIG, among others.

The government, Hart and Zingales say, should intervene in the fates of companies only when there’s an actual market failure.  Such is not the case in the housing market where homes are deflating to their actual value after years of speculative price inflation.  The market is working.

It appears that many people thought that house prices would never fall nationally, and made financial decisions based on this premise. The adjustment to the new reality is painful. But past mistakes do not constitute a market failure. Thus it makes no sense for the government to support house prices, as some economists have suggested.

That’s absolutely correct.  Any attempt to artificially prop up home sales prices would fail abjectly, even if such a monstrosity could be funded by an government that’s already projected to be nearly a trillion dollars in the red next year.  It would be a fool’s errand to try, one that would result in the loss of billions more taxpayer dollars ala the AIG boondoggle.

So what do the professors recommend?  Something that makes damn good sense, namely that the government use its authority to broker mortgage renegotiations so that solvent homeowners can keep their homes and lenders can make the profit they deserve:

Many mortgages are securitized, and the lenders are dispersed and cannot easily alter the terms of the mortgage. It is unlikely that the present situation was anticipated when the loan contracts were written. Government initiatives at facilitating renegotiation therefore make a lot of sense.

Government intervention would be helpful in the mortgage negotiation process because of the scrambled egg-like mess that lenders make of our mortgages.  Rather than owning a mortgage for the life of the loan and making the return – and taking the risk – that they signed into existence, lenders swap and divvy up loans to the point that it’s difficult to say who owns what anymore.  Brilliant.  Small wonder they helped bring this calamity on us – they don’t even know what their assets are.

Hart and Zingales again:

Our desire for a principled approach to this crisis does not arise from an academic need for intellectual coherence. Without principles, policy makers inevitably make mistakes and succumb to lobbying pressure.

That’s what we’ve seen with regard to the repeated AIG bailouts – principles and financial sense cast to the wayside like rubbish that’s served its purpose.

Detroit’s Problems and the Left

Perhaps the fundamental problem of our time is that no one wants to tell – or hear – the truth anymore.  This has certainly been true in Detroit, et al, where the United Auto Workers has fought off wage and benefit cuts for decades.  Now GM is poised at the brink of bankruptcy as a result. 

Loaning GM money would be viable if labor costs were reduced as part of the agreement.  But like others on the left, whose support for unions blinds them to reality, Eric Hoehlert still denies that there’s a fundamental problem with the cost of GM’s work force.

In fact Hoehlert says that the NY Times, Newsweek and other media outlets that reported GM’s labor costs were nearly 50% higher than Toyota’s were not only wrong but either incompetent or malicious:

…what’s obvious to me is that it’s harmful to public discourse when the press, on such a central issue facing our country, fails to clearly state the facts and instead perpetuates misinformation with sloppy reporting…

Mark Perry doesn’t see it that way.  In fact, he says that GM and the UAW misled Congress last week when they said that a new labor agreement will make GM competitive on wages.  Perry’s chart says it all:

image

Hoehlert’s assertion that the media is biased against blue-collar workers and against auto unions doesn’t make sense to me.  Nor does his superficial claim that UAW workers don’t make the hourly rate that the Times, et al, reported.

What that $70 figure (or $73) actually represents is what it costs GM in total labor expenses, on an hourly basis, to manufacture autos.

Do you see that there’s a big distinction? General Motors doles out $70 an hour in overall labor costs to manufacture cars. But individual employees don’t get paid $70 an hour to make cars. (The discrepancy between costs and wages is explained by additional benefits, pension fees, and health-care costs GM pays out to current and retired employees.)

The unpleasant truth that Hoehlert buries in parentheses at the end of his thesis is no mere footnote, it’s the entire point and problem with Detroit, one that can be summed up in a single phrase – total compensation. 

For GM, the problem isn’t so much the current wage of an assembly line worker, it’s the current and historical obligations the company has in addition to base salaries. 

Like an anchor dragging bottom, the obligations demanded by auto unions are a dead weight that has killed GM’s momentum and threaten to drag the entire company down.  The thinking that led workers and union leaders to make unrealistic demands – demands backed by threats of strikes and violence against non-unionized workers – are the primary cause for automakers’ financial crisis.

It’s easy and popular to blame GM’s management for what has happened to the company.  But does anyone truly believe that GM would be teetering on the edge right now if their employees’ total compensation was in line with Toyota’s?

The truth that Hoehlert and others can’t bear to admit is that the leftist policies of unionization and wage and job entitlement have inevitably brought Detroit to this moment in history. 

Faced with nimbler, more efficient competitors, sluggish, sloppy union shops simply cannot compete.  It has always been so and always will be.  Should Congress now bail out companies brought to destruction by these policies?

Actually, yes.  We need a domestic source of cars and trucks.  But taxpayer money should only be loaned to Detroit with the attached string of rectifying the fundamental problem of unionization.

Sued, eHarmony Must Couple Gays

In 2005, eHarmony, a leading on-line matchmaking service, began to fight a discrimination lawsuit filed by a gay man in New Jersey.  In 2007, the state’s attorney general found probable cause that eHarmony had violated N.J.’s Law Against Discrimination.  Today the company gave in to legal pressure and agreed to pair homosexual couples. 

By strong-arming eHarmony into complying with the state’s view of morality, New Jersey eliminated one more small opponent of homosexuality and opened the door to an untold variety of similar nuisance suits in coming years.

Incidentally, this is the exact pattern that social conservatives want to avoid in the gay marriage fight – big government bullying its way into the matter and imposing a solution that’s not what people want.

This is a setback for free markets and image-conscious companies like eHarmony that would prefer to cater to clients of their own choosing. 

Melissa Clouthier says:

These kind of suits make my blood boil. Ditto for women who want access to certain sorts of men’s clubs. People should be able to form groups based on any diverse characteristic they want. It’s called FREEDOM. It may not be politically correct. It may be a stupid group. But that’s what freedom is all about–you’re as free to be an idiot as you are to be smart. It’s up to you. Well, it should be.

Contrary to what’s popular opinion in some circles, there is no Constitutional or moral guarantee that any of us are going to be happy with our lives, live them out in an offense-free bubble, and have our way on every little issue that comes up.

What about the rights of eHarmony’s owners?  What about the rights of heterosexual eHarmony users, many of whom will find the new look and feel of the site distasteful?

What about the government’s ability to discipline itself not to act when it’s not needed? 

Forgotten Purposes

A 61-year-old man faces an early death.  Fortunately, a drug exists that *might* help.  Doctors, recognizing the case is imminently terminal, recommend trying it.  The FDA grants special approval for the treatment.  And money is not an issue.

What could go wrong?

Frederick Baron may be about to find out.

Seems that Biogen is refusing his doctors permission to use Tysabri in his case despite all of the pleading that people – important people – have done on his behalf.  His son Andrew wrote to Biogen president James Mullen:

Though the drug has never been used before in this way, and because time is running out, the head of the FDA, Dr. Andrew von Eschenbach has granted special approval for use of the drug for this purpose but you have personally decided “no”.

Lance Armstrong, who you spoke with on Friday, has also pleaded with you to say “yes” to my father, but you personally said “no”.

President Bill Clinton, Senator John Kerry, Senator John Harkin, Senator Ted Kennedy, Dr. Andrew von Eschenbach and others who you spoke with on Friday and again yesterday on Monday have all pleaded with you to say “yes”, assuring you that there would be no legal risk and no negative consequences to your company if something went wrong, but you continue to say “no”.

Sounds like someone at Biogen needs to remember what the purpose of medicine is, Mr. Mullen.

Frederick Baron might die sooner – sooner than 48 hours?! – if given the drug.  I’m no physician; he might die screaming for all I know.  But if he wants to try it and has the means to compensate Biogen for the treatment, then he should be allowed to do so.  Period.

God bless, Frederick, Andrew, and family.